CANADA FX DEBT-C$ Hits 2-Week Low Even As Investors Eye 75bp Rate Hike

* The Canadian dollar weakens 0.7% against the greenback * Weakest since May 26 at 1.2787 * Canadian economy adds 40,000 jobs in May * Canadian bond yields trade on a curve TORONTO, June 10 (Reuters) – The Canadian dollar fell against its stronger U.S. counterpart on Friday as investors weighed Canadian jobs and U.S. inflation data that supported bets aggressive interest rate hikes by the Bank of Canada and the Federal Reserve. The loonie was trading down 0.7% at 1.2785 against the greenback, or 78.22 US cents, after hitting its lowest level since May 26 at 1.2787. For the week, it was on track to fall 1.5%, which would be its biggest weekly decline since last August. The U.S. dollar surged against a basket of major currencies and global stock markets fell as U.S. consumer prices accelerated in May, suggesting the Fed could continue with interest rate hikes of 50 points base until September to fight inflation. Canada’s central bank also rose in half-percentage-point increments. Money markets see about a 60% chance that he will announce an even bigger move in his next policy announcement on July 13, as data shows the Canadian economy added 40,000 jobs in May, more jobs than expected, and the unemployment rate hit a record low of 5.1%. The price of oil, one of Canada’s top exports, fell 0.4% on Friday to $121.06 a barrel, but was on track for another weekly gain, buoyed by demand for solid fuel in the United States. Returns on Canadian government bonds were mixed on a flatter curve. The 2-year rate rose 6.4 basis points to 3.138%, while the 10-year rate was little changed at 3.263%. On Thursday, the Government of Canada canceled an ultra-long bond issue scheduled for next week, saying the move reflects the country’s declining borrowing needs. (Reporting by Fergal Smith; editing by Jonathan Oatis)

Robert D. Coleman